Certification for seafarers is verified during each PSC inspection. On 1 January 2017 new STCW requirements enter into force and seafarers may need new certificates.

In line with a recommendation from the International Maritime Organization (MSC.1/Circ.1560), the Paris MoU has agreed on a harmonized approach.

In cases where a seafarer’s documentation complied with the requirements in force immediately before 1 January 2017, but was not in accordance with the requirements of the 2010 Manila Amendments to the STCW Convention, PSCOs should take a pragmatic and practical approach during inspections until 1 July 2017.

When a deficiency is found this will not result in the ship being detained.

However, a deficiency may be recorded and the master will be instructed to rectify the deficiency before 1 July 2017.

Stronger demand than expected for dry bulk commodities in 2016’s second half (2H16) is not a panacea for the shipping industry’s problems. And if recent form is anything to go by, it could in fact worsen the overcapacity that is such a drag on profitability.

Since October, the market has improved, but as shipowners association BIMCO pointed out, this was not because of hard work carried out by shipowners scrapping excess capacity, but rather due to demand growing more strongly in the third and fourth quarters than was projected in April and May.

“In 2017, BIMCO expects the supply side to grow by 0.5%. This is simply due to the devastatingly low level of scrapping in diehard markets,” said Peter Sand, its chief analyst, adding that year-to-date scrapping of 27.8 million dwt was significantly lower than BIMCO’s expectation of 40 million dwt for all of 2016.

China’s iron ore imports in September were the highest on record, while its coal imports grew 12% in the first eight months year on year (y/y) from the 2015 period and steel exports rose 6%.

Khalid Hashim, managing director of Precious Shipping, has been an outspoken critic of the shipowner practice of slowing down on scrapping whenever demand for dry bulk shipping increases. He said 2016 had not proceeded as planned and characterised shipowners as acting like “unsupervised children on a candy high” whenever the market picked up.

“Things have not gone as well as expected on the supply side,” he said. “The forecast for the year was for a flat-to-negative growth rate for the world fleet, i.e. scrapping would be equal to or slightly greater than the expected new supply for the year, based on the record 14.09 million dwt scrapped in first quarter.

“Scrapping in second quarter at 8.65 million dwt was good, but a much slower rate compared with the first quarter. However, the third quarter, at 3.24 million dwt, is a truly disappointing number,” noted Hashim, who also noted that new orders were hovering at near zero, with all existing orders being delayed because of financial pressure either on the buyers or at shipyards.

“All of this has helped reduce the pressure from the supply side of the equation,” he pointed out, but if scrapping failed to pick up in 4Q16, the market might drop back sharply in 1Q17 because of the January impact on the supply side – “more ships are delivered in this one month than any other” – and the expected demand slowing as Chinese New Year approaches.

Pacific Basin CEO Mats Berglund said strong grain shipments and a rebound in Chinese coal imports had contributed to stronger rates since the lows of 1Q16, but he pointed out that the rates had remained at historically low levels.

“There is a high inverse correlation between freight rates and scrapping volumes,” he said. “Over the past few months, the scrapping rate has slowed down, given the higher freight rates we have seen, and we have seen less scrapping activity over the past few months because of the monsoon climate in the region.
“We would like to see more scrapping in the industry, and owners should take the opportunity to trade up to younger, better, secondhand ships or resales, as this can help provide a better supply-demand balance,” Berglund explained.
China is the world’s main importer of coal, which is, in general, on a long-term decline across the globe. Rising Chinese seaborne imports in 4Q16 cushioned these effects, including 20.03 million tonnes imported in October.

BIMCO said the 2016 coal revival came on the back of Beijing’s decision in April to limit production. What level of imports the government will now target “is not a matter of free market forces. BIMCO expects Chinese coal imports to stay a critical swing factor in the dry bulk market for 2017,” Sand said.

Hashim expressed concern about Beijing’s production curb. “China has reversed policy on the number of days that Chinese coal mines can operate and hence coal imports into China may not show any growth, and likely will actually show a fall during 2017. This is not good news for the market,” he declared.

The International Energy Agency (IEA) said in its latest Medium-Term Coal Market Report for 2016 that 73% of all the coal consumed in the world was still in Asia. The IEA expected China’s demand to flatten out from now to 2021, although not without significant uncertainty, and also said India and ASEAN would generate the most demand over the next five years.

Shifting demand patterns and moves toward cleaner fuels have seen the dry bulk shipping industry slowly coming around to the idea that the double-digit growth machine that once was China is gone. But rather than be depressed, BIMCO’s Sand cited positives. “There is oversupply, but we are constantly seeing growing demand levels, so this is a situation we can handle by ourselves within the industry and with the tools we already have available,” he assured.

“The future may be dull, but it could also be profitable.”

Using a kamsarmax as a floating silo off Iran for four months seemed like a good idea until it generated a $3.8m bill for cargo damage and hire.

Now the shipowner, Sinotrans subsidiary Yangtze Navigation has won a London arbitration victory and defeated a court appeal by charterer Transgrain. The London High Court has ruled that under the charterparty, a claim arising from an “act or neglect” by one party triggers 100% fault for damages, no matter whether the act in question was culpable.

In December 2012, the 81,700-dwt Yangtze Xing Hua (built 2012) arrived at an unnamed Iranian discharge port with a cargo of soya bean meal from Brazil. Transgrain did not order discharge, however, as cargo receiver Nidera had not paid for the cargo. The ship ended up waiting until May 2013, by which time much of the cargo was unusable. A damage claim of EUR 5m was eventually negotiated down to something over EUR 2.65m, while hire came to just over $1m.

A three man London Maritime Arbitration Association (LMAA) panel found that under the Inter-Club Agreement (ICA) language that is standardly incorporated into charterparties on the New York Produce Exchange (NYPE) form, it was the charterer’s call to keep the vessel waiting, so the charterer had to foot the damage bill, not the owner.

Arbitrators Colin Sheppard, Roger Rookes and Michael Baker-Harber noted that the charterers had taken a “strangely relaxed approach” to the decision to wait outside for over four months.

“[It] seemed very clear that it actually suited the shippers/charterers, in money terms, to use the vessel as floating storage, at the receivers’ expense, rather than unloading it ashore into a bonded warehouse,” they wrote. “Cheap floating storage was one reason to keep the goods on board. The other was that the goods could be diverted easily if they remained on a vessel. Given the receiver’s slow pace of paying, it was perhaps not unreasonable of Nidera to keep the goods on board as necessary.”

But Transgrain took the arbitration award to appeal, with Queen’s Counselor Julian Kenny instructed by Clyde & Co arguing that the word “act” as used in the ICA must be understood in a culpable sense, taking its colour from its context. In the phrase “act or neglect”, the latter term clearly entails fault, and so “act or neglect” must mean a fault, positive or negative.

Justice Nigel Teare rejected that argument in large part based on the historical function of the ICA as a convenient arrangement among protection and indemnity (P&I) insurers, as “an agreement to facilitate the settlement of claims between the clubs”, even though it is now embodied in charterparties between voyage principals.

Citing late Law Lord John Hobhouse, Teare wrote that the ICA “has advantages and disadvantages for shipowners, but it is intended to work in that way: it solves insurance problems and is not concerned with such considerations as hardship or lack of moral culpability.”

On resolving shipowner-charterer disputes under the ICA, Teare recommended a soon to be published paper by Fednav director John Weale, “Cargo Liabilities under the NYPE Time Charter and the Inter-Club Agreement”, delivered as a conference paper in September at the International Colloquium on Charterparties at Swansea University.

In Yangtze Navigation’s successful High Court appeal, Queen’s Counselor Stewart Buckingham was instructed by Bentleys, Stokes and Lowless.

Reederei Foroohari and its management arm BF Shipmanagement has won compensation from the German union Ver.di over the boycotting of one of its ships for not signing up to an International Transport Workers’ Federation (ITF) approved pay agreement. The admission of fault by Ver.di, which acted as an affiliate of the ITF, could have a significant impact on its willingness to boycott ITF ships in Germany.

The dispute dates back to the boycotting of the 10,700-dwt multipurpose ship BF Timaru (built 2007) by ITF inspectors in Bremen in November 2015 when it was claimed the vessel had not signed up to an ITF-approved pay agreement.

Foroohari owner Bijan Foroohari did not, as many owners do, sign up to the ITF wage agreements and instead challenged the three-day boycott in a Bremen industrial tribunal claiming back lost charter hire and other associated costs. Last week, Ver.di chose to pay out EUR 64,000 ($66,770) in compensation by “consent decree” rather than take on the owner in ligation. The payout and costs are set to be shared by Ver.di and the ITF. In a statement Foroohari’s legal representation, Bremen-based law firm Ahlers & Vogel, said the payout was viewed by the tribunal as a “judgment by confession”.

According to TradeWinds sources, in preliminary hearings the Bremen judge leaned towards the owner’s position highlighting Ver.di’s failure to notify the owner in sufficient time and the failure of the ITF inspector to inform the owner. He informed the ship’s manager in error. The judge was also critical of the ITF, asking the owner to sign a wage agreement with which he was unfamiliar.

A Ver.di official pointed out that the failings are “formal mistakes” of procedure by the inspector rather than a decision against the principle of ITF boycotting. However, TradeWinds understands the Bremen judge also took issue with the ITF’s demand that the crew become members of the ITF as part of joining an ITF-approved wage agreement and the owner pay union dues, raising questions over the legitimacy of ITF boycotts.

Each year the ITF and its maritime union affiliates boycott dozens of ships around the world if it feels crew are not employed based on its minimum wage and working condition agreement or if wage agreements are not being adhered to. The move also comes as an indication of the increasingly fractious relationship between owners and the ITF over wages while the industry is stuck in recession.

Last month, TradeWinds exclusively reported how the ITF had rejected a call by the Joint Negotiating Group – shipowners’ representative in shipping’s largest collective bargaining agreement the IBF – to defer a 3.5% wage hike due next year because of the current market downturn.

Fuel supplier Radcliff/Economy Marine Services has turned to a US federal appeals court over a judge’s decision that it does not have a lien against a Technip ship in the battle over OW Bunker’s collapse.

The Alabama company’s lawyer, Maples & Fontenot’s Gilbert Fontenot, today lodged an official notice of the challenge with the Atlanta-headquartered US Court of Appeals for the Eleventh Circuit.

The appeal comes three days after Magistrate Judge William Cassady denied a request for a new trial in the fight involving OW’s largest secured creditor, ING Bank, which the judge had said did hold a lien on Technip’s 33,800-gt Deep Blue (built 2001).

Radcliffe secured an arrest order against the ship, a pipelay vessel onwned by the French offshore construction giant, in December 2014 over $700,000 in fuel purchased through Denmark’s OW as a middle man just days before it collapsed into liquidation that November.

But like many US judges, Cassady ruled that the physical supplier did not have a lien over the ship because it did not deliver the fuel “on the order” of the shipowner or its agent.

Earlier this week, Cassady rejected Fontenot’s arguments that OW acted as an agent for Technip by serving as a bunker broker. Rather, Technip signed a contract with OW, and Radcliffe was a subcontractor.

“The trial record is clear that Technip at no time authorised its contractual counterparty, OW Bunkers UK, to bind the Deep Blue or Technip itself,” the judge said.

Sweden’s Alfa Laval and Norway’s OceanSaver confirmed they have both won type-approval from the US Coast Guard (USCG) for their ballast treatment system.

The approval comes after Norwegian peer Optimarin won the first type approval for a USCG-compliant ballast treatment system earlier this December.

Both companies submitted their application for type approval last September.

Alfa Laval’s system uses an ultra-violet light and mechanical filtration, while OceanSaver’s system uses electrochlorination and mechanical filtration. The first type of system is said to be more suitable for ships with slower ballast flow, while the second system is said to be more suitable for ships with fast ballast flow.

At least 10,000 ships have submitted waivers to the USCG for installing ballast treatment systems due to the lack of USCG-type approval.

‘Honeytrap’ incidents aimed at crews are becoming more common, particularly in the Gulf of Guinea off West Africa.

In September, a seafarer was caught in a ‘sextortion’ trap when at the Togo anchorage, Lome. The crewman was encouraged to expose himself on social media after contact over six weeks, first via LinkedIn and Facebook, then Skype, from a blackmailer who he thought was an attractive young woman. He then received an email demanding that he deposit $10,000 into an account, or his wife and children would hear and see what he had done.

Lampis Alevizos, an IT officer at CMM-Consolidated Marine Management, stressed at a seminar on cyber security at sea held by Immediasea in London last week that crews must be made aware of the issues in language they can understand.

Seafarers may not be aware that using their own computer can link ship systems that are normally unconnected and protected by a firewall, making them open to infection.

“A lot of crew members say: ‘You have a lot of policies and procedures, but we cannot even understand what you are writing. Please do it as simple as you can’,” said Alevizos.

“Device management software does not allow unauthorised USB sticks to be used even if they are plugged in. It can save your life.”

But Alevizos believes the striking posters produced by Be Cyber Aware at Sea can open seafarers’ eyes to the issues. And as campaign founder Jordan Wylie said: “Online is the new frontline.”

The Strike Club is to seek a 10% general increase in premium against the background of a potential loss for the year that ends on 31 January.

The rate rise is similar to that required at this year’s renewal and reflects that the Strike Club is trading in a rather different market to the protection-and-indemnity (P&I) mutuals, where there are no general increases but premium discounts from a number of clubs.

The loss that is in prospect is about $3.1m, so $0.7m smaller than last year’s deficit, but it will still bite into the $27.9m reserve with which the club started the current year.

The Strike Club is telling members that despite a more than 95% renewal rate, the depressed shipping market is resulting in a downturn in business volume, with lower insured sums also hitting premium income.

Although operating expenses have reduced by $1.5m since 2015, lower premium income means costs have increased in relative terms.

In contrast to the P&I clubs, where there has been an extended benign claims experience, the Strike Club was hit by higher claims in the 2014 and 2015 years.

The club, managed by Charles Taylor, the London Stock Exchange-listed company that also runs the Standard P&I Club, however reports that the performance of the current year is “notably better”.

The Strike Club, the market leader in delay insurance for ships, says it remains focused on offering “the most comprehensive and best value marine delay insurance in the market” with its mutual structure ensuring cover is at an “attractive sustainable price”.

The club, insures about 2,700 vessels of 125 million dwt against delays with a shore origin and about 1,200 ships of 50 million dwt against delays arising from crew labour disputes or other onboard issues.

Members include Louis Dreyfus Armateurs, Rickmers Trust, Graig group, China Navigation, Furness Withy, Western Bulk, Clipper group, Pacific Direct Line, Toko Kaiun Kaisha Leonhardt & Blumberg and Bunge.

This year, many of our clients have faced claims arising out of the delivery of cargo without production of the original bills of lading and against letters of indemnity (“LOIs”).

This scenario has become increasingly common in the PRC, particularly in the iron ore trade where banks are looking to enforce their rights in view of the deteriorating financial health of local steel mills and traders. In many cases, the original bills of lading have not passed through the banking chain to the ultimate receivers and cargo is discharged against an LOI and released to a party who has not paid for the goods. This results in a claim against the carrier by the bank for misdelivery and, ultimately, a claim under the LOI by the carrier.

The delivery of cargo without production of the original bills of lading and against an LOI has become widespread and accepted. However, parties often issue LOIs without a full appreciation of the risks involved.

If a party is considering providing an LOI, careful scrutiny of the security for payment under the sale contract and of the risk of the bills of lading being stuck in the chain should be conducted first.

If a party issues an LOI then it should always obtain an LOI from its charterer/buyer down the chain. The indemnity should be on materially identical terms to the LOI provided. Parties should remember that security is only as sound as the solvency of the party providing it and so, ideally, the indemnity should be backed by a guarantee from a first class international bank or, at the very least, a parent company of substance.

In the PRC, the importance of the delivery order and the lack of physical control of the cargo are leading to significant exposures. Parties should try to insert provisions into their contracts which ensure that delivery orders are only exchanged in return for original bills of lading and find ways of asserting greater control over local agents.

Another option which should be explored is increasing the usage of independently owned or leased warehouses or bonded warehouses into which cargo can be discharged. Whether this is viable would largely depend on the facilities at the relevant port and the point at which import duty will become payable.

This was an appeal from an LMAA arbitration award, considering the true construction of clause 8(d) of the Inter-Club Agreement 1996 (“ICA”); specifically, whether the meaning of the term “act” in the phrase “act or neglect” should be restricted to a culpable act.

The dispute concerned a trip time charter where the charterers (also the shippers) had, for their own purposes, ordered the ship to wait off the discharge port for over four months before discharging the cargo. During this time part of the cargo was damaged due to overheating, which was found by the Tribunal to have been caused by a combination of the prolonged delay at the discharge port and the inherent nature of the cargo.

The owners, as carrier, settled the receivers’ claims under the bills of lading and then sought to recover their losses (including hire) from the charterers.

The ICA had been incorporated into the time charterparty and it was common ground that liability was to be settled in accordance with it terms and that Clause 8(d) was the relevant part.

For the purposes of clause 8 of the ICA, sub-clause (d) is the sweep-up provision and provides that:

“All other cargo claims whatsoever (including claims for delay to cargo):
50% Charterers
50% Owners

unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim.”

The Tribunal found that the charterers whilst not in “neglect” had, by their decisions to load the cargo and delay discharge (“to not only protect their position but we sense actually profit from it”), performed an “act” for the purposes of clause 8(d). Accordingly, the charterers were 100% liable under the provision.

The charterers argued on appeal that this decision was wrong as a matter of law, on the basis that, for these purposes, the word “act” must take its “colour” from its combination with “neglect” and thus be limited to a “culpable act”; and there was nothing culpable in the charterers’ “decision”.

However, the learned Admiralty Judge, Teare J, found that the meaning of the word “act” was not to be coloured by its association with “neglect” and upheld the broader, non-culpable, interpretation at which the Tribunal had arrived.

In the judgment, the origin of the ICA (as a blunt tool by which P&I insurers might circumvent perceived uncertainties associated with Clause 8 of the NYPE ’46 form), and its subsequent incorporation into NYPE based time charters, is rehearsed for the sake of finding the colour behind the word “act”.

Ultimately the learned judge found that the meaning of the word can only be determined in the context of the ICA and that other constructions surrounding the phrase in other contexts (with or without the additional word “fault”) were not of assistance.

As such the judgment means that the word “act” in Clause 8(d) of the ICA must now include any positive conduct of the parties (or their servants and sub-contractors).

Although the decision is robust in its assertion that the ICA provision is a “more or less” or “broadly” mechanical process, for the charterers, the Tribunal’s view as to the benefit of their decision might seem to have offered its own colour to the outcome.

The learned judge gave permission to appeal and it would seem surprising if this opportunity were not taken up. Whatever the outcome though, the judgment prompts further thought as to the role of the ICA within time charters.